Stephen Herring v. Eileen Campbell

Case: 11-40953 Document: 00511948633 Page: 1 Date Filed: 08/07/2012
IN THE UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT United States Court of Appeals
Fifth Circuit
FILED
August 7, 2012
No. 11-40953 Lyle W. Cayce
Clerk
STEPHEN ROBERT HERRING and MICHAEL HERRING
Plaintiffs-Appellees
v.
EILEEN M. CAMPBELL, as Plan Administrator of Marathon Oil Company
Thrift Plan
Defendant-Appellant
Appeal from the United States District Court
for the Eastern District of Texas
Before JOLLY, HIGGINBOTHAM, and DENNIS, Circuit Judges.
PATRICK E. HIGGINBOTHAM, Circuit Judge:
In this ERISA benefits case, the plan administrator appeals the district
court’s judgment that a deceased plan participant’s stepsons, rather than his
siblings, are entitled to the deceased’s benefits. We REVERSE.
I.
John Wayne Hunter passed away in October 2005. Hunter had retired
from employment with Marathon Oil Company and was a participant in the
Marathon Oil Company Thrift Plan, a pension plan governed by the Employee
Retirement Income Security Act. The Plan allowed Hunter to designate a
primary and second beneficiary. In 1990 and again in 2001, Hunter designated
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No. 11-40953
as his primary beneficiary his wife, Joyce Mae Hunter, and no secondary
beneficiary. After Joyce Mae’s death in 2004, Hunter did not designate a new
Plan beneficiary.
When a Plan participant dies without designating a valid beneficiary, the
Plan provides for the distribution of the decedent’s benefits to one of five classes
in the following order of priority:
A. The member’s surviving spouse
B. The member’s surviving children
C. The member’s surviving parents
D. The member’s surviving brothers and sisters
E. The executor or administrator of the member’s estate.
After Hunter passed away, the Plan Administrator considered, and rejected, the
possibility that Hunter’s stepsons, Stephen and Michael Herring, might be
entitled to Hunter’s benefits. Because Hunter’s spouse had predeceased him and
he had no surviving parents and no biological or legally adopted children, the
Plan Administrator distributed the benefits, which totaled more than
$300,000.00, to Hunter’s six siblings.
About two years later, the Herrings challenged the distribution, arguing
that they were Hunter’s “children” and should have been given priority over
Hunter’s siblings. Citing their close relationship with Hunter, the fact that
Hunter left his estate to them, and the fact that Hunter referred to them as his
“beloved sons” in his will, the Herrings suggested that they were entitled to
Hunter’s benefits under the Texas probate law doctrine of “equitable adoption”
(“adoption by estoppel”). The Plan Administrator conducted a second review and
again determined that Hunter’s stepsons were not entitled to collect benefits
under the Plan. The Herrings then filed suit.
After a bench trial, the district court found for the Herrings and denied the
Plan Administrator’s counterclaim for a declaratory judgment, concluding that
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the Plan Administrator “abused her discretion by failing to consider the
Herrings’ claims of adoption by estoppel.” After the Plan Administrator filed a
motion for reconsideration, the district court issued an order modifying some of
its findings of fact and conclusions of law but did not alter its judgment. The
Plan Administrator timely appealed.
II.
We review de novo a district court’s determination of whether a plan
administrator abused her discretion or improperly denied a claim for benefits.1
We review factual findings underlying the district court’s decision for clear
error.2
Where, as here, “the plan gives the plan administrator ‘discretionary
authority to determine the eligibility for benefits or to construe the terms of the
plan,’” the plan administrator’s interpretation of plan terms is reviewed for
abuse of discretion.3 This is a two-step process: we first ask whether the plan
administrator’s interpretation was “legally correct.”4 If it was, the inquiry ends
there; if not, we ask whether the plan administrator’s decision was an abuse of
discretion.5
III.
In determining whether a plan administrator’s interpretation is legally
correct, this court considers three factors: (1) whether the plan administrator has
given the plan a uniform construction; (2) whether the plan administrator’s
1
Sweatman v. Commercial Union Ins. Co., 39 F.3d 594, 601 (5th Cir. 1994).
2
Threadgill v. Prudential Sec. Group, 145 F.3d 286, 292 (5th Cir. 1998).
3
Dowden v. Blue Cross & Blue Shield, 126 F.3d 641, 643-44 (5th Cir. 1997) (quoting
Duhon v. Texaco, Inc., 15 F.3d 1302, 1305 (5th Cir.1994)).
4
Pickrom v. Belger Cartage Serv., Inc., 57 F.3d 468, 471 (5th Cir. 1995).
5
See id.
3
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No. 11-40953
interpretation is consistent with a fair reading of the plan; and (3) whether
different interpretations of the plan will result in unanticipated costs.6
Our consideration of those factors reveals no error in the Plan
Administrator’s interpretation. During her initial review, the Plan
Administrator found that the Plan had not previously determined whether the
term “children” as used in the Plan included stepchildren who had not been
legally adopted. She concluded that the term “children” meant biological or
legally adopted children based on (1) the need for a uniform standard for
determining who were “children” under the Plan; (2) the administrative need for
a practical and objective mechanism to avoid potentially burdensome and
expensive investigations into a claimant’s status; and (3) her conclusion that the
exclusion of stepchildren from the definition was most likely to align with the
expectations of the majority of Plan participants. The Plan Administrator was
particularly concerned that many Plan participants would not necessarily expect
stepchildren to benefit from the Plan absent affirmative designation by the
participant since, in many cases, stepparents and stepchildren might not have
a close relationship and participants with both biological and stepchildren might
not expect both to benefit. When she reviewed her initial determination after
the Herrings’ 2008 challenge, the Plan Administrator applied these same
considerations and also considered that including “equitably adopted”
individuals under the definition of “children” would create substantial
uncertainties and additional expenses for the Plan by giving rise to disputes
about whether individuals had been “equitably adopted.”
The Plan Administrator properly focused on providing a uniform
interpretation and considered that the definition urged by the Herrings would
result in unanticipated costs. The Herrings have not shown that her
6
Id.
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interpretation was in any way inconsistent with a “fair reading” of the plan.
Citing cases in which courts have looked to state law to determine the identity
of an ERISA plan beneficiary’s spouse, the Herrings argue that the Plan
Administrator should have considered whether they were equitably adopted
under Texas law because equitable adoption “relates and defines” a “familial
relationship.” The Herrings misunderstand the doctrine of equitable adoption.
“Equitable adoption” or “adoption by estoppel” of a child occurs when “one . . .
promises or acts in a way that precludes the person and his or her estate from
denying adopted status to the child.”7 The doctrine has no broader application
and does not create a legal parent-child relationship.8 Nothing in the Plan or
ERISA required the Plan Administrator to incorporate the concept of equitable
adoption into the Plan definition of “children.”9
IV.
Because the Plan Administrator’s interpretation of the term “children” was
legally correct, the district court erred when it set aside the Plan Administrator’s
decision and granted judgment for the Herrings.
REVERSED.
7
BLACK’S LAW DICTIONARY 52 (8th ed. 2004); see, e.g., Heien v. Crabtree, 369 S.W.2d 28,
31 (Tex. 1963) (explaining that equitable adoption functions narrowly “to enforce the rights
of the child under [an unperformed] agreement to adopt” (quotation marks and citation
omitted)).
8
See Heien, 369 S.W.2d at 30.
9
Whether an “equitable adoption” even occurred in the Herrings’ case is a separate
question, which we do not reach.
5